‘I’m lucky as my energy bill only doubled’: Small Businesses Struggle to Stay Afloat

As we head into the end of 2022, energy is one of the biggest challenges facing businesses. From churches to cafés to record labels, we spoke to the people behind the organisations to see how they are coping with their rising bills.

Connor Campbell Published on 25 October 2022.
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‘I’m lucky as my energy bill only doubled’:  Small Businesses Struggle to Stay Afloat

“We’re really fortunate, but the high cost of energy is stunting the church’s growth,” says Matti Shannon, the operations manager for local church B&A Bristol. Fortunate, in this case, is a business energy bill that has only jumped 100% year on year. Still, compared to other organisations he knows, Matti feels lucky.

After crunching the numbers, the organisation is facing a £10,000 increase in its energy bills next year. And that is after factoring in help from the Energy Bill Relief Scheme.

The Energy Bill Relief Scheme, which is set to run from 1 October 2022 to 31 March 2023, caps the wholesale gas and electricity prices energy suppliers can charge businesses and non-domestic customers.

“What scares me is that we’re talking about a year-on-year rise of 100%,” continues Matti “For people who’ve had a locked-in contract, they are [now] talking three, four, five times [their existing contract] very easily.”

The business energy wheel of fortune

B&A Bristol is part of a buying scheme for parish churches, which was set up by the Church of England to purchase business energy as a larger group, and signs its contracts on a rolling basis every year. This strategy, according to Matti, seems to be the reason why the church is ‘only’ doubling its energy prices.

Other organisations nearby are struggling with what steps to take next, and not everyone has the benefit of bulk buying. Just down the road from B&A Bristol, pizza restaurant TDK (The Dough Kitchen) is locked into its current deal until April 2023, but is already being encouraged by its business energy broker to sign its next contract now. It is not an easy decision to make.

“We feel reluctant to lock in at what feels like a very high price,” says Sarah Borrett, co-owner of the restaurant. “It is hard to know what is going to happen and it is very hard to plan.”

Not every business is in the same boat, however, and just as some have locked in a fixed rate for their mortgage for several years, the same is true for business energy. These organisations were fortunate enough to sign their contract at the ‘right’ time, giving them years to ride out the current chaos on a fixed tariff.

Yet even then, for some companies those longer-term contracts are now a poisoned chalice. While they have saved money over the past few years, it means the shock of a new contract can prove disastrous for some companies.

Talking of a friend, Matti at B&A Bristol said that “he’d been on a really comfy fix, so he was looking at an eight-times increase for his little restaurant-café. Covid took out all of his reserves, both financially and mentally, and he and his family fought back from that.” But his business energy bills proved to be a crisis too far and the café is now closed.

Between a rock and a hard place

For Matti and B&A Bristol, the £10,000 increase to their energy bills means no new staff, and no extra spending on their youth programmes, an area that has been underfunded over the past few years.

For other organisations, it is a case of balancing how the UK energy crisis and the cost of living crisis affects both them and their customers.

“We are very worried as we don’t know if this situation is going to end,” say Giusi and Fernando Coral, owners of Micro Roastery Coral Cafe.

“The only way to manage the rising energy costs is by increasing the price of goods we are selling,” they explain.

But passing on price increases isn’t without risk as you could end up with no customers coming to your café, so in a way these prices are capped, Giusi and Fernando conclude.

With consumers struggling just as much as businesses, it leaves places like Micro Roastery Coral Cafe stuck between a rock and a hard place, with little clarity about their future.

The common theme among these small businesses, whatever energy contract they are on, is that they need to keep an eye on their expenses. If they don’t raise prices, then their owners will have to make significant changes to how they operate.

Back in April, TDK had already cut back on its opening hours to save on energy and staffing costs. “[Now] we do other things to try to save energy like keeping the coffee machine and pizza oven on in between lunch and dinner because we end up using more energy switching some appliances off and then back on again,” says Sarah.

An endless list of rising costs

Even business owners who aren’t overly concerned about their bills at the moment will be aware that surging energy prices don’t occur in a vacuum. It is another worry to add to a growing list of problems that includes inflation and the cost of hiring staff in the UK.

And these spiralling costs are not limited to small businesses in Bristol. Pete Morgan, co-founder and director of Burning Shed, a record label and online music store based in Norwich, wasn’t too concerned with his energy bills. Yet, Morgan says: “It’s annoying because it’s one more thing chipping away at our margins on top of many other things that have increased over the last couple of years.”

Since speaking to NerdWallet, however, Burning Shed has been told its energy bills are set to rise from £3,000 to £12,500 a year. And the record label won't be alone in this. Sooner or later, businesses that haven’t been too worried about their bills may find their situation has drastically changed overnight.

Image source: Getty Images

About the author:

Connor is a writer and spokesperson for NerdWallet. Previously at Spreadex, his market commentary has been quoted in the likes of the BBC, The Guardian, Evening Standard, Reuters and The Independent. Read more

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